Talk about an unwelcome tax cut - DOGE restructuring saw IRS lose 40% of its IT workforce in 2025

• The US IRS lost about 40% of its IT staff during DOGE's 2025 "restructuring"
• Senior technology leadership declined by nearly 80% during the shakeup
• Workforce reductions increased modernization strain and threatened the timely processing of tax returns

The United States Internal Revenue Service (IRS) has revealed the scale of disruption it experienced during 2025, with its technology division absorbing the heaviest losses.

The IRS, which administers federal tax collection in the United States, lost roughly 40% of its IT workforce and nearly 80% of its senior technology leadership during a sweeping restructuring effort by the so-called Department of Government Efficiency (DOGE).

Overall staffing across the agency declined by about one quarter during the same period.

Federal restructuring and DOGE’s impact on the IRS

The changes unfolded as the Trump administration advanced a broad federal restructuring agenda.

Central to that effort was DOGE, which pushed aggressive cost reduction measures across agencies, often with little explanation or reasoning to its actions

Within the IRS, the technology arm experienced deeper cuts than most operational divisions, with Chief Information Officer Kaschit Pandya describing the reorganization as the largest internal technology overhaul in two decades.

Pandya said the prior structure relied heavily on siloed departments that limited coordination and slowed delivery.

Leadership has since established cross-functional teams designed to manage projects from start to finish without fragmented handoffs between units.

The IT division supports filing infrastructure, legislative system updates, cybersecurity controls, and integration with external tax software used by millions of Americans.

A report from the US Treasury Inspector General for Tax Administration warned that the agency was already behind in processing paper returns digitally before staffing reductions increased pressure.

The watchdog also noted risks tied to implementing inflation adjustments and newly enacted tax provisions ahead of the 2026 filing season.

At the start of 2025, the IT division included roughly 8,500 employees, but by October it had 7,135 — a decline of about 16% based on official headcount data.

Pandya has said total IT losses during the broader restructuring reached approximately 40%, a figure that may include separations, leadership removals, and reassignments beyond the October headcount comparison.

Reports indicate that, as part of the reorganization, 1,000 tech specialists were reassigned to deliver frontline services during the US tax season, a redistribution which raised internal concerns about whether modernization priorities could remain on schedule as seasonal demands increased.

Against this backdrop of staffing losses and modernization strain, agency leadership introduced AI tools into internal workflows.

Officials say AI systems are intended to assist employees with process efficiency, digital return handling, and internal coordination, assurances which arrive after major workforce reductions, inviting scrutiny about capacity and long-term sustainability.

The restructuring and rapid introduction of AI have drawn political attention from those concerned about oversight and execution risk.

Lawmakers have questioned certain modernization efforts and external collaborations, reflecting broader debates about oversight and operational transparency.

Whether automation can offset the loss of institutional knowledge remains uncertain as filing deadlines and legislative implementation timelines approach.

Via The Register

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